Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236393 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14362
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We analyze the effects of a large place-based policy, subsidizing up to 50% of investment costs of manufacturing firms in East Germany after reunification. We show that a 1-percentage-point decrease in the subsidy rate leads to a 1% decrease in manufacturing employment. We document important spillovers for untreated sectors in treated counties, untreated counties connected via trade and local taxes, whereas we do not find spillovers on counties in the same local labor market. We show that the policy is at least as efficient as cash transfers to the unemployed, but is more effective in curbing regional inequality.
Subjects: 
place-based policies
employment
spillovers
administrative microdata
JEL: 
H24
J21
J23
Document Type: 
Working Paper

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